2107 Indian Share Market - From Darkness to Light

In
life, we cross several milestones. Sometimes, just being at the right place at
the right time is all that is required. For equity mutual fund investors, at
sometimes could be just the choice of funds that helped them get a return of
18-34%.

In
the past 12 months, the markets have seen two different events that slowed down
the economic activities. Demonetisation and Goods & Service Tax (GST)
affected the financial calculations of businesses, from large corporate to
small traders.

When
the government tried to rein-in cash dealings, personal lives and the
unorganised sector were badly affected; to some extent big businesses
too. Market participants became cautious and they predicted volatility
and a big correction.

But
one big factor of liquidity proved them wrong and although the markets are a
slave of earnings, this time life was different in equity market. The proverb
“When the head is present, the tail should not wag” proved wrong.

Large
cap stocks struggled to deliver big return, but small and micro-cap stocks took
the market by surprise and delivered superior returns.

Here
are the numbers:

In %

Capitalisation

Average
Return

Best

Least

Large Cap

18.8

25

12

Multicap

20

27.5

11.5

Midcap

20.3

34.5

10

Small cap

27.4

34

9

During
this period, I too suggested asset allocation and lower exposure to small- and
micro-cap fund. Many of my clients ended up with a fewer percentage points less
than expected, but at least they didn’t spend sleepless nights during the
volatile phases this year.

But
it must be noted that the one-year average return of large-, multicap-, and
midcap funds were not far apart. The choice of funds made the difference.

Going
forward, the market may exhibit similar trends till the earnings are back and
the economy improves from here. One factor keeping the market intact for the
past few months, despite FIIs selling heavily, is the retail investor inflows
into mutual fund through the SIP route. This has never been seen this much in
the Indian market.

So,
don’t speculate too much on the market. Instead, follow the basics and practise
the right allocation, based on your risk appetite and tenure of the goal to
earn the return you want.

Don’t
invest for next year based on the previous year’s return. Be rational in investing
this festive occasion.

As
in the past, those who invest in the equity market are very special and they
beat those investing in fixed deposit by a big margin.

And
remember to share some of your money with those in need. That will compound
your joy.

As
Winston Churchil said, “We make a living by what we get. We make a life by what
we give.”